Income tax
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Income tax is a direct tax imposed by the central government of India on taxable income of individuals, Hindu Undivided Families, companies, and other entities. Taxable income includes income from salaries, house property, business or profession, capital gains, and other sources. The income tax rates vary from nil to 30% depending on the amount and type of taxable income. The year in which income is earned is called the previous year and is taxed in the subsequent year known as the assessment year.
Income tax
- 1. INCOME TAX
- 2. An income tax is a government tax imposed on individuals or entities (taxpayers) that varies with the income or profits (taxable income) of the taxpayer. What is income tax
- 3. Income tax is a direct tax It is levied & collected by Central Government In case of direct tax , burden and incidence are on same person who pays the tax, but in case of indirect tax, the burden is on one and incidence is on another.
- 4. Tax on “Income” Income tax is imposed on taxable income of all persons including individuals, Hindu Undivided Families (HUFs), companies, firms, local authority and any other artificial judicial person. Levy of tax is separate on each of the persons and is governed by the Indian Income Tax Act, 1961. Income tax is a key source of funds that the government uses to fund its activities and serve the public.
- 5. Scope of taxable income & Charge Net income range (Individual resident (Age below 60 Yrs.) or any NRI / HUF / AOP / BOI / AJP) Net income range (For resident senior citizen1) Net income range (For super senior citizen2) Net income range (For any other person excluding companies and co-operative societies) Income Tax rates3 Up to 200,000 Up to 250,000 Up to 500,000 Up to 200,000 NIL 200,001–500,000 250,001– 500,000 - 200,001– 500,000 10% 500,001– 1,000,000 500,001– 1,000,000 500,001– 1,000,000 500,001– 1,000,000 20% Above 1,000,000 Above 1,000,000 Above 1,000,000 Above 1,000,000 30% A surcharge of 10% on income tax payable is applicable for every non-corporate assessee, whose total income exceeds 10 million
- 6. What comes under Income Income broadly includes : Profits & gains from business and profession Salary income Winnings from lotteries, crossword puzzles, races, games, gambling or betting Allowances given to assessee by his employee Capital gains,
- 7. Previous Yr. & Assessment Yr. The year in which income is earned is known as previous year (P.Y.) and it is taxed in the next year called Assessment year(A.Y.)
- 8. Heads of Income Income from Salary Income from House Property Income from Business or Profession Income from Capital Gains Income from Other Sources 1. 2. 3. 4. 5.
- 9. Components of salary Basic salary, Dearness Allowance(DA), House Rent Allowance(HRA), Conveyance allowance, Children education allowance, Children Hostel expenditure allowance, Travel concession
- 10. Income from Salary Income can be charged under this head only if there is an employer employee relationship between the payer and payee. Salary includes basic salary or wages, pension, gratuity, commission, retirement benefits. The aggregate of the above incomes, after exemptions available, is known as Gross Salary Basic salary along with commissions and bonuses is fully taxable.
- 11. Income from House Property Rental incomes arising from residential or commercial property are taxable under the IT act. Rental agreement would form the basis to determine income under this head
- 12. Income from Business or profession Income earned through your profession or business is charged under the head “profits and gains of business or profession”. The income chargeable to tax is the difference between the credits received on running the business and expenses incurred. The deductions allowed are depreciation of assets used for business; rent for premises; insurance and repairs for machinery and furniture; advertisements; traveling and many more.
- 13. Income from Capital Gains Any profit or gain arising from transfer of capital asset held as investments are chargeable to tax under the head “capital gains”.
- 14. Income from Other sources This head comprises miscellaneous incomes, such as interest from bank deposits, winnings from game shows and lotteries.